Australia’s Place in the International Arbitration Landscape

Litigation Capital Management (LCM) recently hosted seminars in Sydney and Melbourne where the Managing Counsel of the ICC International Court of Arbitration – Ms Ziva Filipic – presented the ICC’s statistics reflecting Australia’s current position in the international arbitration market, and discussed what opportunities might be available in future for Australian arbitration practitioners.

According to ICC data, ICC arbitration has been growing at an average of 5% per annum over the last ten years (in terms of managed cases). Specifically, from 599 cases in 2007 to 966 cases in 2016. In the last twelve months that growth accelerated to 20%:In 2016, a majority of parties (76%) were European or from the Americas. A review of the nationality of parties involved in these arbitrations revealed that Australian parties made up less than 1% of the total number. Australia was also the place of arbitration in 1.2% of cases. These numbers depict a low utilization of ICC arbitration in Australia.

By contrast, 2.9% of ICC arbitrator appointments are for an Australian practitioner. This ranks Australia in the top 10 of nations for arbitrator appointments. This data indicates that the ICC rates Australian arbitrators highly. This is, however, anomalous to Australia’s use of the process as a nation.

So, what can we derive from these statistics?

The relatively low utilization of ICC arbitration in Australia tends to be a result of perceptions that institutional arbitration:

takes too long;

involves additional costs;

is more relevant for larger, cross-border matters (to be contrasted to many Australian arbitrations being domestic); and

is better suited to non-common law, continental cases.

Ms Filipic countered these perceptions by showing that the ICC:

Drives for awards to be rendered efficiently, including requiring awards to be rendered two months for sole arbitrators, and three months for arbitral tribunals, after the final substantive step in an arbitration, failing which the tribunal’s fees are reduced.

Provides for administration costs to be calculated on a sliding scale in proportion to the amount in dispute, and are capped at USD 150,000 for disputes in excess of USD 500 million.

Has a growing acceptance around the globe – including in traditional common law jurisdictions.

Provides an extensive and experienced knowledge base of arbitration practitioners that the parties and tribunals are able to access and utilize to ensure compliance with the ICC Rules, and the enforceability of an award.

As to why Australia “punches above its weight” in terms of arbitrator appointments, the reasons included:

Australia provides a high quality legal educational system that produces high quality lawyers; and

Australia has a strong litigation culture as a result of its common law heritage, which seamlessly transfers into arbitration practice.

Australia is in a position to export our expertise. In addition to having the necessary ambition and incentive, to achieve this requires adopting an international outlook and mindset. Whether the recent “globalization” of the Australian legal market (through the combination of local firms with international firms) will support this is yet to be seen.

Until recently the Australian legal landscape has been highly fragmented, as demonstrated by a Bar that is still state-based. In contrast, the United Kingdom sells its expertise on the basis of having an international Bar.

The growth and spread of international arbitration globally is driving a lot of new, yet inexperienced practitioners into the space. Australian practitioners are very well positioned to take a leading role in the practice of international arbitration ahead of these new players. Australian lawyers can support their own positioning through educating their clients about the benefits of international arbitration and proactively including arbitration clauses tailored to protect their clients’ interests into new contracts.

As the last twelve months of ICC data shows, this space is growing rapidly and if we wish to have a more meaningful role in its development from “Down Under”, we will need to act quickly.

Footnote: LCM would like to thank Clifford Chance and King & Wood Mallesons for hosting the seminars in Sydney and Melbourne.